EX-4.4





 Exhibit 4.4 

HYDRO ONE LIMITED 
 CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (unaudited) 
 For the three and nine months ended September 30, 2018 and 2017 

 

																	
	 	  	 Three months ended

September 30
	 	  	 Nine months ended

September 30
	 
	  (millions of Canadian dollars, except per share amounts)	  	2018	 	  	2017	 	  	2018	 	  	2017	 
	 Revenues
	  				  				  				  			
	 Distribution (includes $68 related party revenues; (2017 – $70) and $205 (2017—$213) for the
three and nine months ended September 30, respectively) (Note 23)
	  	 	1,103	 	  	 	1,040	 	  	 	3,284	 	  	 	3,317	 
	 Transmission (includes $475 related party revenues (2017 – $390) and $1,295 (2017 - $1,125) for the
three and nine months ended September 30, respectively) (Note 23)
	  	 	493	 	  	 	471	 	  	 	1,344	 	  	 	1,199	 
	 Other
	  	 	10	 	  	 	11	 	  	 	31	 	  	 	35	 
	 	  	 	1,606	 	  	 	1,522	 	  	 	4,659	 	  	 	4,551	 
					
	 Costs
	  				  				  				  			
	 Purchased power (includes $324 related party costs (2017 – $278) and $1,089 (2017 - $1,177) for the
three and nine months ended September 30, respectively) (Note 23)
	  	 	733	 	  	 	675	 	  	 	2,158	 	  	 	2,213	 
	 Operation, maintenance and administration (Note 23)
	  	 	271	 	  	 	277	 	  	 	797	 	  	 	822	 
	 Depreciation and amortization (Note 5)
	  	 	213	 	  	 	209	 	  	 	620	 	  	 	603	 
	 	  	 	1,217	 	  	 	1,161	 	  	 	3,575	 	  	 	3,638	 
					
	 Income before financing charges and income taxes
	  	 	389	 	  	 	361	 	  	 	1,084	 	  	 	913	 
	 Financing charges (Note 6)
	  	 	149	 	  	 	114	 	  	 	336	 	  	 	320	 
					
	 Income before income taxes
	  	 	240	 	  	 	247	 	  	 	748	 	  	 	593	 
	 Income taxes (Note 7)
	  	 	41	 	  	 	23	 	  	 	115	 	  	 	73	 
	 Net income
	  	 	199	 	  	 	224	 	  	 	633	 	  	 	520	 
					
	 Other comprehensive income
	  	 	2	 	  	 	—	 	  	 	2	 	  	 	1	 
	 Comprehensive income
	  	 	201	 	  	 	224	 	  	 	635	 	  	 	521	 
					
	 Net income attributable to:
	  				  				  				  			
	 Noncontrolling interest
	  	 	1	 	  	 	1	 	  	 	4	 	  	 	4	 
	 Preferred shareholders
	  	 	4	 	  	 	4	 	  	 	13	 	  	 	13	 
	 Common shareholders
	  	 	194	 	  	 	219	 	  	 	616	 	  	 	503	 
	 	  	 	199	 	  	 	224	 	  	 	633	 	  	 	520	 
					
	 Comprehensive income attributable to:
	  				  				  				  			
	 Noncontrolling interest
	  	 	1	 	  	 	1	 	  	 	4	 	  	 	4	 
	 Preferred shareholders
	  	 	4	 	  	 	4	 	  	 	13	 	  	 	13	 
	 Common shareholders
	  	 	196	 	  	 	219	 	  	 	618	 	  	 	504	 
	 	  	 	201	 	  	 	224	 	  	 	635	 	  	 	521	 
					
	 Earnings per common share (Note 21)
	  				  				  				  			
	 Basic
	  	$	0.33	 	  	$	0.37	 	  	$	1.03	 	  	$	0.85	 
	 Diluted
	  	$	0.32	 	  	$	0.37	 	  	$	1.03	 	  	$	0.84	 
	 Dividends per common share declared (Note
20)
	  	$	0.23	 	  	$	0.22	 	  	$	0.68	 	  	$	0.65	 

 See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited). 

  

					
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 HYDRO ONE LIMITED 

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (unaudited) 
 At
September 30, 2018 and December 31, 2017 
  

									
	(millions of Canadian dollars)	  	September 30,
2018	 	 	December 31,
2017	 
	 Assets
	  				 			
	 Current assets:
	  				 			
	 Cash and cash equivalents
	  	 	613	 	 	 	25	 
	 Accounts receivable (Note 8)
	  	 	590	 	 	 	636	 
	 Due from related parties
	  	 	310	 	 	 	253	 
	 Other current assets (Note 9)
	  	 	129	 	 	 	105	 
	 	  	 	1,642	 	 	 	1,019	 
			
	 Property, plant and equipment (Note 10)
	  	 	20,475	 	 	 	19,947	 
	 Other long-term assets:
	  				 			
	 Regulatory assets (Note 11)
	  	 	3,227	 	 	 	3,049	 
	 Deferred income tax assets
	  	 	783	 	 	 	987	 
	 Intangible assets (net of accumulated amortization – $426; 2017 – $375)
	  	 	379	 	 	 	369	 
	 Goodwill
	  	 	325	 	 	 	325	 
	 Other assets
	  	 	6	 	 	 	5	 
		  	 	4,720	 	 	 	4,735	 
	 Total assets
	  	 	26,837	 	 	 	25,701	 
			
	 Liabilities
	  				 			
	 Current liabilities:
	  				 			
	 Short-term notes payable (Note 14)
	  	 	444	 	 	 	926	 
	 Long-term debt payable within one year (Notes 14, 16)
	  	 	981	 	 	 	752	 
	 Accounts payable and other current liabilities (Note 12)
	  	 	960	 	 	 	905	 
	 Due to related parties
	  	 	6	 	 	 	157	 
	 	  	 	2,391	 	 	 	2,740	 
			
	 Long-term liabilities:
	  				 			
	 Long-term debt (includes $839 measured at fair value; 2017 – $541) (Notes 14, 16)
	  	 	10,475	 	 	 	9,315	 
	 Convertible debentures (Notes 15, 16)
	  	 	489	 	 	 	487	 
	 Regulatory liabilities (Note 11)
	  	 	174	 	 	 	128	 
	 Deferred income tax liabilities
	  	 	74	 	 	 	71	 
	 Other long-term liabilities (Note 13)
	  	 	2,755	 	 	 	2,707	 
		  	 	13,967	 	 	 	12,708	 
	 Total liabilities
	  	 	16,358	 	 	 	15,448	 
			
	 Contingencies and Commitments (Notes 25, 26)
	  				 			
	 Subsequent Events (Note 28)
	  				 			
			
	 Noncontrolling interest subject to redemption
	  	 	21	 	 	 	22	 
			
	 Equity
	  				 			
	 Common shares (Note 19)
	  	 	5,641	 	 	 	5,631	 
	 Preferred shares (Note 19)
	  	 	418	 	 	 	418	 
	 Additional paid-in capital
	  	 	54	 	 	 	49	 
	 Retained earnings
	  	 	4,301	 	 	 	4,090	 
	 Accumulated other comprehensive loss
	  	 	(5	) 	 	 	(7	) 
	 Hydro One shareholders’ equity
	  	 	10,409	 	 	 	10,181	 
			
	 Noncontrolling interest
	  	 	49	 	 	 	50	 
	 Total equity
	  	 	10,458	 	 	 	10,231	 
	 	  	 	26,837	 	 	 	25,701	 

 See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited). 

  

					
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 HYDRO ONE LIMITED 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited) 

For the nine months ended September 30, 2018 and 2017 
  

																																	
	  Nine months ended September 30, 2018
  (millions of Canadian
dollars)	  	Common
Shares	 	  	Preferred
Shares	 	  	Additional
Paid-in
Capital	 	 	Retained
Earnings	 	 	 Accumulated

Other
 Comprehensive

Income (Loss)
	 	 	Hydro One
Shareholders’
Equity	 	 	Non-
controlling
Interest	 	 	Total
Equity	 
	 January 1, 2018
	  	 	5,631	 	  	 	418	 	  	 	49	 	 	 	4,090	 	 	 	(7	) 	 	 	10,181	 	 	 	50	 	 	 	10,231	 
	 Net income
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	629	 	 	 	—	 	 	 	629	 	 	 	3	 	 	 	632	 
	 Other comprehensive income
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	—	 	 	 	2	 	 	 	2	 	 	 	—	 	 	 	2	 
	 Distributions to noncontrolling interest
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(4	) 	 	 	(4	) 
	 Dividends on preferred shares
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	(13	) 	 	 	—	 	 	 	(13	) 	 	 	—	 	 	 	(13	) 
	 Dividends on common shares
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	(405	) 	 	 	—	 	 	 	(405	) 	 	 	—	 	 	 	(405	) 
	 Common shares issued
	  	 	10	 	  	 	—	 	  	 	(10	) 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	 Stock-based compensation
	  	 	—	 	  	 	—	 	  	 	15	 	 	 	—	 	 	 	—	 	 	 	15	 	 	 	—	 	 	 	15	 
	 September 30,
2018
	  	 	5,641	 	  	 	418	 	  	 	54	 	 	 	4,301	 	 	 	(5	) 	 	 	10,409	 	 	 	49	 	 	 	10,458	 
									
	  Nine months ended September 30, 2017
  (millions of Canadian
dollars)	  	Common
Shares	 	  	Preferred
Shares	 	  	Additional
Paid-in
Capital	 	 	Retained
Earnings	 	 	Accumulated
Other
Comprehensive
Income (Loss)	 	 	Hydro One
Shareholders’
Equity	 	 	Non-
controlling
Interest	 	 	Total
Equity	 
	 January 1, 2017
	  	 	5,623	 	  	 	418	 	  	 	34	 	 	 	3,950	 	 	 	(8	) 	 	 	10,017	 	 	 	50	 	 	 	10,067	 
	 Net income
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	516	 	 	 	—	 	 	 	516	 	 	 	3	 	 	 	519	 
	 Other comprehensive income
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	—	 	 	 	1	 	 	 	1	 	 	 	—	 	 	 	1	 
	 Distributions to noncontrolling interest
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(3	) 	 	 	(3	) 
	 Dividends on preferred shares
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	(13	) 	 	 	—	 	 	 	(13	) 	 	 	—	 	 	 	(13	) 
	 Dividends on common shares
	  	 	—	 	  	 	—	 	  	 	—	 	 	 	(387	) 	 	 	—	 	 	 	(387	) 	 	 	—	 	 	 	(387	) 
	 Common shares issued
	  	 	8	 	  	 	—	 	  	 	(8	) 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	 Stock-based compensation
	  	 	—	 	  	 	—	 	  	 	18	 	 	 	—	 	 	 	—	 	 	 	18	 	 	 	—	 	 	 	18	 
	 September 30,
2017
	  	 	5,631	 	  	 	418	 	  	 	44	 	 	 	4,066	 	 	 	(7	) 	 	 	10,152	 	 	 	50	 	 	 	10,202	 

 See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited). 

  

					
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 HYDRO ONE LIMITED 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) 
 For the
three and nine months ended September 30, 2018 and 2017 
  

																	
	 	  	Three months ended
September 30	 	 	Nine months ended
September 30	 
	  (millions of Canadian dollars)	  	2018	 	 	2017	 	 	2018	 	 	2017	 
	 Operating activities
	  				 				 				 			
	 Net income
	  	 	199	 	 	 	224	 	 	 	633	 	 	 	520	 
	 Environmental expenditures
	  	 	(7	) 	 	 	(7	) 	 	 	(17	) 	 	 	(19	) 
	 Adjustments for non-cash items:
	  				 				 				 			
	 Depreciation and amortization (excluding asset removal costs)
	  	 	188	 	 	 	187	 	 	 	549	 	 	 	537	 
	 Regulatory assets and liabilities
	  	 	(29	) 	 	 	(32	) 	 	 	(32	) 	 	 	92	 
	 Deferred income taxes
	  	 	36	 	 	 	17	 	 	 	95	 	 	 	55	 
	 Unrealized loss (gain) on foreign exchange contract
	  	 	24	 	 	 	—	 	 	 	(25	) 	 	 	—	 
	 Other
	  	 	12	 	 	 	1	 	 	 	27	 	 	 	9	 
	 Changes in non-cash
balances related to operations (Note 24)
	  	 	85	 	 	 	52	 	 	 	(54	) 	 	 	(1	) 
	 Net cash from operating activities
	  	 	508	 	 	 	442	 	 	 	1,176	 	 	 	1,193	 
					
	 Financing activities
	  				 				 				 			
	 Long-term debt issued
	  	 	—	 	 	 	—	 	 	 	1,400	 	 	 	—	 
	 Long-term debt repaid
	  	 	—	 	 	 	—	 	 	 	(1	) 	 	 	(1	) 
	 Short-term notes issued
	  	 	445	 	 	 	1,232	 	 	 	2,987	 	 	 	2,810	 
	 Short-term notes repaid
	  	 	(1,049	) 	 	 	(1,053	) 	 	 	(3,469	) 	 	 	(2,385	) 
	 Convertible debentures issued (Note 15)
	  	 	—	 	 	 	513	 	 	 	—	 	 	 	513	 
	 Dividends paid
	  	 	(141	) 	 	 	(135	) 	 	 	(418	) 	 	 	(400	) 
	 Distributions paid to noncontrolling interest
	  	 	(1	) 	 	 	(1	) 	 	 	(6	) 	 	 	(4	) 
	 Other
	  	 	—	 	 	 	(27	) 	 	 	(6	) 	 	 	(27	) 
	 Net cash from (used in) financing activities
	  	 	(746	) 	 	 	529	 	 	 	487	 	 	 	506	 
					
	 Investing activities
	  				 				 				 			
	 Capital expenditures (Note 24)
	  				 				 				 			
	 Property, plant and equipment
	  	 	(370	) 	 	 	(358	) 	 	 	(1,022	) 	 	 	(1,071	) 
	 Intangible assets
	  	 	(25	) 	 	 	(24	) 	 	 	(61	) 	 	 	(57	) 
	 Capital contributions received
	  	 	—	 	 	 	—	 	 	 	—	 	 	 	9	 
	 Other
	  	 	1	 	 	 	—	 	 	 	8	 	 	 	(8	) 
	 Net cash used in investing activities
	  	 	(394	) 	 	 	(382	) 	 	 	(1,075	) 	 	 	(1,127	) 
					
	 Net change in cash and cash equivalents
	  	 	(632	) 	 	 	589	 	 	 	588	 	 	 	572	 
	 Cash and cash equivalents, beginning of period
	  	 	1,245	 	 	 	33	 	 	 	25	 	 	 	50	 
	 Cash and cash equivalents, end of period
	  	 	613	 	 	 	622	 	 	 	613	 	 	 	622	 

 See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited). 

  

					
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 HYDRO ONE LIMITED 
 NOTES
TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 
 For the three and nine months ended September 30, 2018 and 2017 

 

	1.	 DESCRIPTION OF THE BUSINESS 



Hydro One Limited (Hydro One or the Company) was incorporated on August 31, 2015, under the Business Corporations Act (Ontario). On
October 31, 2015, the Company acquired Hydro One Inc., a company previously wholly-owned by the Province of Ontario (Province). The acquisition of Hydro One Inc. by Hydro One was accounted for as a common control transaction and Hydro One is a
continuation of business operations of Hydro One Inc. At September 30, 2018, the Province held approximately 47.4% (December 31, 2017 - 47.4%) of the common shares of Hydro One. The principal businesses of Hydro One are the transmission and
distribution of electricity to customers within Ontario. 
 Earnings for interim periods may not be indicative of results for the year due to the impact
of seasonal weather conditions on customer demand and market pricing. 
 Rate Setting 

Transmission 
 In December 2017, the Ontario
Energy Board (OEB) approved Hydro One Networks Inc.‘s (Hydro One Networks) 2018 rates revenue requirement of $1,511 million. See Note 11 - Regulatory Assets and Liabilities for additional information. 

On May 10, 2018, the OEB issued its Decision and Rate Order on B2M LP’s 2018 transmission application reflecting revenue requirement of
$36 million, effective January 1, 2018. 
 Distribution 

In March 2017, Hydro One Networks filed an application with the OEB for 2018-2022 distribution rates. The requested revenue requirements, updated in June
2018, are $1,514 million for 2018, $1,561 million for 2019, $1,607 million for 2020, $1,681 million for 2021, and $1,722 million for 2022. The OEB decision on this application is pending. 

On November 17, 2017, Hydro One filed with the OEB a request for 2018 interim rates based on 2017
OEB-approved rates, adjusted for an updated load forecast. On December 1, 2017, the OEB denied this request and set interim 2018 rates based on 2017 OEB-approved
rates with no adjustments. 
  

	2.	 SIGNIFICANT ACCOUNTING POLICIES 



Basis of Consolidation 
 These unaudited condensed interim
Consolidated Financial Statements (Consolidated Financial Statements) include the accounts of the Company and its subsidiaries. Intercompany transactions and balances have been eliminated. 

Basis of Accounting 
 These Consolidated Financial Statements are
prepared and presented in accordance with United States (US) Generally Accepted Accounting Principles (GAAP) for interim financial statements and in Canadian dollars. 

The accounting policies applied are consistent with those outlined in Hydro One’s annual audited consolidated financial statements for the year ended
December 31, 2017, with the exception of the adoption of new accounting standards as described below and in Note 3 - New Accounting Pronouncements. These Consolidated Financial Statements reflect adjustments, that are, in the opinion of
management, necessary to reflect fairly the financial position and results of operations for the respective periods. These Consolidated Financial Statements do not include all disclosures required in the annual financial statements and should be
read in conjunction with the 2017 annual audited consolidated financial statements. 
 Revenue Recognition 

The Company adopted Accounting Standard Codification (ASC) 606 - Revenue from Contracts with Customers on January 1, 2018 using the
retrospective method, without the election of any practical expedients. There was no material impact to the Company’s revenue recognition policy as a result of adopting ASC 606. 

Nature of Revenues 
 Transmission revenues
predominantly consist of transmission tariffs, which are collected through OEB-approved Uniform Transmission Rates (UTR) and the monthly peak demand for electricity across Hydro One’s high-voltage
network. OEB-approved UTR is based on an approved revenue requirement that includes a rate of return. The transmission tariffs are designed to recover revenues necessary to support the Company’s
transmission system with sufficient capacity to accommodate the maximum expected demand which is influenced by weather and economic conditions. Transmission revenues are recognized as electricity is transmitted and delivered to customers. 

Distribution revenues attributable to the delivery of electricity are based on OEB-approved distribution rates and
are recognized on an accrual basis and include billed and unbilled revenues. Billed revenues are based on electricity delivered as measured from customer meters. At the end of each month, electricity delivered to customers since the date of the last
billed meter reading is estimated, and the corresponding unbilled revenue is recorded. The unbilled revenue estimate is affected by energy consumption, weather, and changes in the composition of customer classes. 

  

					
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 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Distribution revenue also includes an amount relating to rate protection for rural, residential, and
remote customers, which is received from the Independent Electricity System Operator (IESO) based on a standardized customer rate that is approved by the OEB. 

Revenues also include amounts related to sales of other services and equipment. Such revenue is recognized as services are rendered or as equipment is
delivered. Revenues are recorded net of indirect taxes. 
 Employee Future Benefits 

The Company adopted Accounting Standard Update (ASU) 2017-07 on January 1, 2018. The Company used the
retrospective method for guidance relating to the presentation of the service cost component and the other components of net periodic pension and post-retirement benefit costs in the Statement of Operations and Comprehensive Income. There was no
change in presentation in the Statement of Operations and Comprehensive Income. The Company used the prospective method for guidance relating to the capitalization of the service cost component of net periodic pension and post-retirement and
post-employment benefit costs in assets. Upon adoption of ASU 2017-07, the Company recognized the Post-Retirement and Post-Employment Benefits Non-Service Costs
Regulatory Asset. See below and Note 11 - Regulatory Assets and Liabilities for additional information. 
 Defined Benefit Pension 

Defined benefit pension costs are recorded on an accrual basis for financial reporting purposes. Hydro One records a regulatory asset equal to the net
underfunded projected benefit obligation for its defined benefit pension plan. Defined benefit pension costs are attributed to labour and a portion not exceeding the service cost component of accrual basis defined benefit pension costs is
capitalized as part of the cost of property, plant and equipment and intangible assets. The remaining defined benefit pension costs are charged to results of operations (operation, maintenance and administration costs). 

Post-Retirement and Post-Employment Benefits 

All post-retirement and post-employment benefit costs are attributed to labour and are either charged to results of operations (operation, maintenance and
administration costs) or capitalized as part of the cost of property, plant and equipment and intangible assets for service cost component and to regulatory assets for all other components of the benefit costs, consistent with their inclusion in OEB-approved rates. 
  

	3.	 NEW ACCOUNTING PRONOUNCEMENTS 



The following tables present ASC guidance issued by the Financial Accounting Standards Board that are applicable to Hydro One: 

Recently Adopted Accounting Guidance 
  

									
	  Guidance	  	Date issued	  	Description	  	Effective date	  	Impact on Hydro One
	  ASC 606	  	 May 2014 –
 November
2017
	  	ASC 606 Revenue from Contracts with Customers replaced ASC 605 Revenue Recognition. ASC 606 provides guidance on revenue recognition relating to the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.	  	January 1, 2018	  	 Hydro One adopted ASC 606 on January 1, 2018 using the retrospective method, without the election of any
practical expedients and there was no material impact to the Company’s revenue recognition policy upon adoption. The Company has included the disclosure requirements of ASC 606 for interim periods in the year of adoption.

 

	  ASU   2017-07	  	March 2017	  	Service cost components of net benefit cost associated with defined benefit plans are required to be reported in the same line as other compensation costs arising from services rendered by
the Company’s employees. All other components of net benefit cost are to be presented in the income statement separately from the service cost component. Only the service cost component is eligible for capitalization where applicable.	  	January 1, 2018	  	Hydro One applied for a regulatory asset to maintain the capitalization of post-employment benefit related costs and as such, there is no material impact upon adoption. See Note 2 -
Significant Accounting Policies and Note 11 - Regulatory Assets and Liabilities.


  

					
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 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  


									
	Recently Issued Accounting Guidance Not Yet Adopted
					
	  Guidance	  	Date issued	  	Description	  	Effective date	  	Anticipated impact on Hydro One
	   2016-02

  2018-01
   2018-10
   2018-11
	  	February 2016 – July 2018	  	 Lessees are required to recognize the rights and obligations resulting from operating leases as assets (right to
use the underlying asset for the term of the lease) and liabilities (obligation to make future lease payments) on the balance sheet. ASU 2018-01 permits an entity to elect an optional practical expedient to
not evaluate under ASC 842 land easements that exist or expired before the entity’s adoption of ASC 842 and that were not previously accounted for as leases under ASC 840. ASU 2018-10 amends narrow
aspects of ASC 842. ASU 2018-11 provides entities with an additional and option transition method in adopting ASC 842. ASU 2018-11 also permits lessors to elect an
optional practical expedient to not separate non-lease components from the associated lease component by underlying asset classes.

 
	  	January 1, 2019	  	The Company has reviewed a substantial number of existing leases and relevant contracts and continues its assessment activities. No quantitative determination has been made at this time. The
Company is on track for implementation of this standard by the effective date.
	  2018-07	  	June 2018	  	 Expansion in the scope of ASC 718 to include share-based payment
transactions for acquiring goods and services from non-employees. Previously, ASC 718 was only applicable to share-based payment transactions for acquiring goods and services from employees.

 
	  	January 1, 2019	  	Under assessment
	  2018-13	  	August 2018	  	 Disclosure requirements on fair value measurements in ASC 820 are modified to improve the effectiveness of
disclosures in financial statement notes.
  
	  	January 1, 2020	  	Under assessment
	  2018-14	  	August 2018	  	 Disclosure requirements related to single-employer defined benefit pension or other post-retirement benefit
plans are added, removed or clarified to improve the effectiveness of disclosures in financial statement notes.
  
	  	January 1, 2021	  	Under assessment
	  2018-15	  	August 2018	  	 The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement
that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement is
not affected by the amendment.
  
	  	January 1, 2020	  	Under assessment

  

	4.	 BUSINESS COMBINATIONS 



Avista Corporation Purchase Agreement 
 In July 2017, Hydro One
reached an agreement to acquire Avista Corporation (Merger) for approximately $6.7 billion in an all-cash transaction. Avista Corporation is an investor-owned utility providing electric generation,
transmission, and distribution services. It is headquartered in Spokane, Washington, with service areas in Washington, Idaho, Oregon, Montana and Alaska. The closing of the Merger is subject to receipt of certain regulatory and government approvals,
and the satisfaction of customary closing conditions. Regulatory authorities in Washington and Oregon have extended the timetable for arriving at a decision in Hydro One’s acquisition of Avista Corporation to
mid-December 2018. In addition, the Idaho Public Utilities Commission rescheduled its hearing from July 23, 2018 to November 26-27, 2018. 

See Note 14 - Debt and Credit Agreements, Note 15 - Convertible Debentures and Note 16 - Fair Value of Financial Instruments and Risk Management for
details of bridge financing, convertible debentures and foreign exchange contract, respectively, related to financing of the Merger. 
 Orillia Power Purchase
Agreement 
 In August 2016, the Company reached an agreement to acquire Orillia Power Distribution Corporation (Orillia Power), an electricity
distribution company located in Simcoe County, Ontario, from the City of Orillia for approximately $41 million, including the assumption of approximately $15 million in outstanding indebtedness and regulatory liabilities, subject to
closing adjustments and regulatory approval by the OEB. In September 2016, Hydro One filed an application with the OEB to acquire Orillia Power, which was denied by the OEB on April 12, 2018. On September 26, 2018, Hydro One filed a new
application with the OEB for approval to acquire Orillia Power. 
 Peterborough Distribution Purchase Agreement 

On July 31, 2018, Hydro One reached an agreement to acquire the business and distribution assets of Peterborough Distribution Inc. (Peterborough
Distribution), an electricity distribution company located in east central Ontario, from the City of Peterborough. Hydro One will pay the City of Peterborough $105 million for the transaction. The acquisition is conditional upon the
satisfaction of customary closing conditions and approval by the OEB and the Competition Bureau. On October 12, 2018, the Company filed an application with the OEB for approval of the acquisition. 

  

					
		 	7	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  


	5.	 DEPRECIATION AND AMORTIZATION 



 

																	
	 	  	 Three months ended
September 30

 
	 	  	 Nine months ended
September 30

 
	 
	  (millions of dollars)	  	2018	 	  	2017	 	  	2018	 	  	2017	 
	 Depreciation of property, plant and equipment
	  	 	163	 	  	 	164	 	  	 	481	 	  	 	473	 
	 Asset removal costs
	  	 	25	 	  	 	22	 	  	 	71	 	  	 	66	 
	 Amortization of intangible assets
	  	 	18	 	  	 	16	 	  	 	51	 	  	 	45	 
	 Amortization of regulatory assets
	  	 	7	 	  	 	7	 	  	 	17	 	  	 	19	 
	 	  	 	213	 	  	 	209	 	  	 	620	 	  	 	603	 

  

	6.	 FINANCING CHARGES 


  

																	
	 	  	 Three months ended
September 30

 
	 	  	 Nine months ended
September 30

 
	 
	  (millions of dollars)	  	2018	 	  	2017	 	  	2018	 	 	2017	 
	 Interest on long-term debt
	  	 	118	 	  	 	115	 	  	 	332	 	 	 	342	 
	 Unrealized loss (gain) on foreign exchange contract (Note 16)
	  	 	24	 	  	 	—	 	  	 	(25	) 	 	 	—	 
	 Interest on convertible debentures
	  	 	15	 	  	 	9	 	  	 	46	 	 	 	9	 
	 Interest on short-term notes
	  	 	2	 	  	 	1	 	  	 	9	 	 	 	3	 
	 Other
	  	 	4	 	  	 	3	 	  	 	14	 	 	 	8	 
	 Less: Interest capitalized on construction and development in
progress
	  	 	(14)	 	  	 	(14)	 	  	 	(40	) 	 	 	(42	) 
	 	  	 	149	 	  	 	114	 	  	 	336	 	 	 	320	 

  

	7.	 INCOME TAXES 



As a rate regulated utility company, the Company’s effective tax rate excludes temporary differences that are recoverable in future rates charged to
customers. Income tax expense differs from the amount that would have been recorded using the combined Canadian federal and Ontario statutory income tax rate. The reconciliation between the statutory and the effective tax rates is provided as
follows: 
  

									
	 	 	 Nine months ended September 30

 
	 
	  (millions of dollars)	 	2018	 	 	2017	 
	 Income before income taxes
	 	 	748	 	 	 	593	 
	 Income taxes at statutory rate of 26.5% (2017 - 26.5%)
	 	 	198	 	 	 	157	 
			
	 Increase (decrease) resulting from:
	 				 			
	 Net temporary differences recoverable in future rates charged to customers:
	 				 			
	 Capital cost allowance in excess of depreciation and amortization
	 	 	(40	) 	 	 	(38	) 
	 Overheads capitalized for accounting but deducted for tax purposes
	 	 	(12	) 	 	 	(12	) 
	 Interest capitalized for accounting but deducted for tax purposes
	 	 	(11	) 	 	 	(13	) 
	 Pension contributions in excess of pension expense
	 	 	(6	) 	 	 	(11	) 
	 Environmental expenditures
	 	 	(5	) 	 	 	(6	) 
	 Other
	 	 	(9	) 	 	 	(7	) 
	 Net temporary differences
	 	 	(83	) 	 	 	(87	) 
	 Net permanent differences
	 	 	—	 	 	 	3	 
	 Total income taxes
	 	 	115	 	 	 	73	 
			
	 Effective income tax rate
	 	 	15.4%	 	 	 	12.3%	 
	  
  

8.   ACCOUNTS RECEIVABLE

 
	 
 

    



	 	 	September 30,	 	 	December 31,	 
	  (millions of dollars)	 	2018	 	 	2017	 
	 Accounts receivable – billed
	 	 	318	 	 	 	298	 
	 Accounts receivable – unbilled
	 	 	297	 	 	 	367	 
	 Accounts receivable, gross
	 	 	615	 	 	 	665	 
	 Allowance for doubtful accounts
	 	 	(25	) 	 	 	(29	) 
	 Accounts receivable, net
	 	 	590	 	 	 	636	 


  

					
		 	8	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 The following table shows the movements in the allowance for doubtful accounts for the nine months ended
September 30, 2018 and the year ended December 31, 2017: 
  

									
	 	  	Nine months ended
September 30,	 	 	Year ended
December 31,	 
	  (millions of dollars)	  	2018	 	 	2017	 
	 Allowance for doubtful accounts – beginning
	  	 	(29	) 	 	 	(35	) 
	 Write-offs
	  	 	16	 	 	 	25	 
	 Additions to allowance for doubtful accounts
	  	 	(12	) 	 	 	(19	) 
	 Allowance for doubtful accounts – ending
	  	 	(25	) 	 	 	(29	) 
			
	 9.   OTHER CURRENT ASSETS
	  				 			
			
	 	  	September 30,	 	 	December 31,	 
	  (millions of dollars)	  	2018	 	 	2017	 
	 Regulatory assets (Note 11)
	  	 	47	 	 	 	46	 
	 Materials and supplies
	  	 	20	 	 	 	18	 
	 Prepaid expenses and other assets
	  	 	40	 	 	 	41	 
	 Derivative instrument - foreign exchange contract (Note
16)
	  	 	22	 	 	 	—	 
	 	  	 	129	 	 	 	105	 
			
	 10.  PROPERTY, PLANT AND EQUIPMENT
	  				 			
			
	 	  	September 30,	 	 	December 31,	 
	  (millions of dollars)	  	2018	 	 	2017	 
	 Property, plant and equipment
	  	 	29,683	 	 	 	29,025	 
	 Less: accumulated depreciation
	  	 	(10,791	) 	 	 	(10,455	) 
		  	 	18,892	 	 	 	18,570	 
	 Construction in progress
	  	 	1,424	 	 	 	1,215	 
	 Future use land, components and spares
	  	 	159	 	 	 	162	 
	 	  	 	20,475	 	 	 	19,947	 


  

					
		 	9	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  


	11.	 REGULATORY ASSETS AND LIABILITIES 



 

									
	 	  	September 30,	 	  	December 31,	 
	  (millions of dollars)	  	2018	 	  	2017	 
	 Regulatory assets:
	  				  			
	 Deferred income tax regulatory asset
	  	 	1,872	 	  	 	1,762	 
	 Pension benefit regulatory asset
	  	 	1,001	 	  	 	981	 
	 Environmental
	  	 	184	 	  	 	196	 
	 Post-retirement and post-employment benefits
	  	 	59	 	  	 	36	 
	 Foregone revenue deferral
	  	 	56	 	  	 	23	 
	 Share-based compensation
	  	 	40	 	  	 	40	 
	 Debt premium
	  	 	23	 	  	 	27	 
	 Distribution system code exemption
	  	 	10	 	  	 	10	 
	 B2M LP start-up costs
	  	 	2	 	  	 	4	 
	 Other
	  	 	27	 	  	 	16	 
	 Total regulatory assets
	  	 	3,274	 	  	 	3,095	 
	 Less: current portion
	  	 	47	 	  	 	46	 
	 	  	 	3,227	 	  	 	3,049	 
			
	 Regulatory liabilities:
	  				  			
	 Pension cost variance
	  	 	56	 	  	 	23	 
	 Green Energy expenditure variance
	  	 	54	 	  	 	60	 
	 External revenue variance
	  	 	29	 	  	 	46	 
	 Retail settlement variance account
	  	 	20	 	  	 	—	 
	 Conservation and Demand Management deferral variance
	  	 	8	 	  	 	28	 
	 2015-2017 rate rider
	  	 	6	 	  	 	6	 
	 Deferred income tax regulatory liability
	  	 	5	 	  	 	5	 
	 Other
	  	 	17	 	  	 	17	 
	 Total regulatory liabilities
	  	 	195	 	  	 	185	 
	 Less: current portion
	  	 	21	 	  	 	57	 
	 	  	 	174	 	  	 	128	 

 Deferred Income Tax Regulatory Asset 

On September 28, 2017, the OEB issued its Decision and Order on Hydro One Networks’ 2017 and 2018 transmission rates revenue requirements
(Decision). In its Decision, the OEB concluded that the net deferred tax asset resulting from transition from the payments in lieu of tax regime under the Electricity Act (Ontario) to tax payments under the federal and provincial tax regime
should not accrue entirely to Hydro One’s shareholders and that a portion should be shared with ratepayers. On November 9, 2017, the OEB issued a Decision and Order that calculated the portion of the tax savings that should be shared with
ratepayers. The OEB’s calculation would result in an impairment of Hydro One Networks’ transmission deferred income tax regulatory asset of up to approximately $515 million. If the OEB were to apply the same calculation for sharing in
Hydro One Networks’ 2018-2022 distribution rates, for which a decision is currently outstanding, it would result in an additional impairment of up to approximately $370 million related to Hydro One Networks’ distribution deferred
income tax regulatory asset. The exposure from the potential impairments would be a one-time decrease in net income and the deferred income tax regulatory assets of up to approximately $885 million. In
October 2017, the Company filed a Motion to Review and Vary (Motion) the Decision and filed an appeal with the Divisional Court of Ontario (Appeal). In both cases, the Company’s position is that the OEB made errors of fact and law in its
determination of allocation of the tax savings between the shareholders and ratepayers. On December 19, 2017, the OEB granted a hearing of the merits of the Motion which was held on February 12, 2018. On August 31, 2018, the OEB
granted the Motion and returned the portion of the Decision relating to the deferred tax asset to an OEB panel for reconsideration. Based on the assumptions that the OEB applies established rate making principles in a manner consistent with its past
practice and does not exercise its discretion to take other policy considerations into account, management is of the view that it is likely that the aforementioned tax savings will be allocated to the benefit of Hydro One shareholders. 

Foregone Revenue Deferral 
 As part of its September 2017
decision on Hydro One Networks’ transmission rate application for 2017 and 2018 rates, the OEB approved the foregone revenue account to record the difference between revenue earned under the rates approved as part of the decision, effective
January 1, 2017, and revenue earned under the interim rates until the approved 2017 rates were implemented. The OEB approved a similar account for B2M LP in June 2017 to record the difference between revenue earned under the newly approved
rates, effective January 1, 2017, and the revenue recorded under the interim 2017 rates. The balances of these accounts are being returned to or recovered from ratepayers, respectively, over a one-year
period ending December 31, 2018. As part of its May 2018 decision, the OEB also directed B2M LP to record in this account any revenue collected in 2018 in excess of the final approved 2018 B2M LP revenue requirement. The draft rate order
submitted by Hydro One Networks relating to the transmission 

  

					
		 	10	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 rate application for 2017 and 2018 rates was approved by the OEB in November 2017. This draft rate order
reflects the September 2017 decision, including a reduction of the amount of cash taxes approved for recovery in transmission rates due to the OEB’s basis to share the savings resulting from a deferred tax asset with ratepayers. The
Company’s position in the aforementioned Motion is that the OEB made errors of fact and law in its determination of allocation of the tax savings between the shareholders and ratepayers. Therefore, the Company has also reflected the impact of
this position in the Foregone Revenue Deferral account. As the OEB granted the Motion and returned the portion of the Decision relating to the deferred tax asset to an OEB panel for reconsideration, the timing for recovery of this impact will be
determined as part of the reconsideration by the panel. 
 Post-Retirement and Post-Employment Benefits Non-Service Cost
Regulatory Asset 
 Hydro One applied to the OEB for a regulatory asset to record the components other than service costs relating to its
post-retirement and post-employment benefits that would have previously been capitalized to property, plant and equipment and intangible assets prior to adoption of ASU 2017-07. In May 2018, the OEB approved
the regulatory asset for Hydro One Networks’ Transmission Business. It is expected that the regulatory asset application for Hydro One Networks’ Distribution business will be considered as part of Hydro One Networks’ application for
2018-2022 distribution rates, OEB approval of which is currently pending. Hydro One has recorded the components other than service costs relating to its post-retirement and post-employment benefits that would have been capitalized to property, plant
and equipment and intangible assets, in the Post-Retirement and Post-Employment Benefits Non-Service Cost Regulatory Asset. 
  

	12.	 ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES 



 

									
			
	 	  	September 30,	 	  	December 31,	 
	  (millions of dollars)	  	2018	 	  	2017	 
	 Accounts payable
	  	 	159	 	  	 	177	 
	 Accrued liabilities
	  	 	650	 	  	 	572	 
	 Accrued interest
	  	 	130	 	  	 	99	 
	 Regulatory liabilities (Note 11)
	  	 	21	 	  	 	57	 
	 	  	 	960	 	  	 	905	 
			
	 13.  OTHER LONG-TERM LIABILITIES    
	  				  			
			
	 	  	September 30,	 	  	December 31,	 
	  (millions of dollars)	  	2018	 	  	2017	 
	 Post-retirement and post-employment benefit liability
	  	 	1,561	 	  	 	1,519	 
	 Pension benefit liability
	  	 	1,001	 	  	 	981	 
	 Environmental liabilities (Note 18)
	  	 	152	 	  	 	168	 
	 Asset retirement obligations
	  	 	9	 	  	 	9	 
	 Long-term accounts payable and other liabilities
	  	 	32	 	  	 	30	 
	 	  	 	2,755	 	  	 	2,707	 

  

	14.	 DEBT AND CREDIT AGREEMENTS 



Short-Term Notes and Operating Credit Facilities 
 Hydro One
meets its short-term liquidity requirements in part through the issuance of commercial paper under Hydro One Inc.’s Commercial Paper Program which has a maximum authorized amount of $1.5 billion. These short-term notes are denominated in
Canadian dollars with varying maturities up to 365 days. The Commercial Paper Program is supported by Hydro One Inc.’s committed revolving credit facilities totalling $2.3 billion. 

At September 30, 2018, Hydro One’s consolidated committed, unsecured and undrawn credit facilities (Operating Credit Facilities) totalling
$2,550 million included Hydro One’s credit facilities of $250 million and Hydro One Inc.’s credit facilities of $2.3 billion. At September 30, 2018, no amounts have been drawn on the Operating Credit Facilities. 

Acquisition Credit Facilities 
 For the purpose of bridge
financing for the pending acquisition of Avista Corporation, the Company secured a $1.0 billion non-revolving equity bridge credit facility, and a US$2.6 billion
non-revolving debt bridge credit facility (Acquisition Credit Facilities) in June 2018. The equity bridge credit facility matures 90 days after the drawdown date and in any event not later than June 30,
2019. The debt bridge credit facility is available until March 31, 2019, and matures one year after the drawdown date. At September 30, 2018, no amounts have been drawn on the Acquisition Credit Facilities. 

Hydro One is required to make prepayments of the Acquisition Credit Facilities in an amount equal to the net cash proceeds from any common equity,
preferred equity, bond or other debt offerings, including the net proceeds from the final instalment of Convertible Debentures issued in August 2017, and any non-ordinary course asset sales by Hydro One and
its subsidiaries, subject to certain exceptions. Any prepayment under the Acquisition Credit Facilities may not be re-borrowed. The Acquisition Credit Facilities agreements contain customary representations
and warranties and affirmative and negative covenants of Hydro One that are consistent with those of Hydro One’s Operating Credit Facilities. If the Merger does not close, then these agreements will be cancelled. 

  

					
		 	11	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Long-Term Debt 

The following table presents long-term debt outstanding at September 30, 2018 and December 31, 2017: 

 

									
			
	 	  	September 30,	 	 	December 31,	 
	  (millions of dollars)	  	2018	 	 	2017	 
	 Hydro One Inc. long-term debt (a)
	  	 	11,323	 	 	 	9,923	 
	 HOSSM long-term debt (b)
	  	 	172	 	 	 	176	 
		  	 	11,495	 	 	 	10,099	 
	 Add: Net unamortized debt premiums
	  	 	13	 	 	 	14	 
	 Add: Unrealized
mark-to-market gain1
	  	 	(11	) 	 	 	(9	) 
	 Less: Unamortized deferred debt issuance costs
	  	 	(41	) 	 	 	(37	) 
	 Total long-term debt
	  	 	11,456	 	 	 	10,067	 
			
	 Less: Long-term debt payable within one year
	  	 	(981	) 	 	 	(752	) 
	 	  	 	10,475	 	 	 	9,315	 

  

	1 	 The unrealized mark-to-market net gain
relates to $50 million of the Series 33 notes due 2020, $500 million Series 37 notes due 2019 and $300 million Series 39 notes due 2021. The unrealized
mark-to-market net gain is offset by an $11 million (December 31, 2017 - $9 million) unrealized
mark-to-market net loss on the related fixed-to-floating interest-rate swap agreements,
which are accounted for as fair value hedges. 


  

	(a)	 Hydro One Inc. long-term debt 



At September 30, 2018, long-term debt of $11,323 million (December 31, 2017 - $9,923 million) was outstanding, the majority of
which was issued under Hydro One Inc.’s Medium Term Note (MTN) Program. The maximum authorized principal amount of notes issuable under the current MTN Program prospectus filed in March 2018 is $4.0 billion. At September 30, 2018,
$2.6 billion remained available for issuance until April 2020. 
 During the nine months ended September 30, 2018, Hydro One
Inc. issued long-term debt totalling $1.4 billion (2017 - $nil) under its MTN Program as follows: 
  

	 	•	 	 $300 million notes (MTN Series 39 notes) with a maturity date of June 25, 2021 and a coupon rate of 2.57%;




	 	•	 	 $350 million notes (MTN Series 40 notes) with a maturity date of June 26, 2025 and a coupon rate of 2.97%; and




	 	•	 	 $750 million notes (MTN Series 41 notes) with a maturity date of June 25, 2049 and a coupon rate of 3.63%.



 No long-term debt was repaid during the nine months ended September 30, 2018 or 2017. 

 

	(b)	 Hydro One Sault Ste. Marie LP (HOSSM) long-term debt 



At September 30, 2018, long-term debt of $172 million (December 31, 2017 - $176 million), with a principal amount of
$145 million (December 31, 2017 - $146 million) was held by HOSSM. During the three and nine months ended September 30, 2018 and 2017, no long-term debt was issued, and $1 million (2017 - $1 million) of long-term debt was repaid, all
in the second quarter. 
 Principal and Interest Payments 

Principal repayments and related weighted-average interest rates are summarized by the number of years to maturity in the following table: 

 

									
			
	 	  	Long-term Debt
Principal Repayments	 	  	Weighted-average
Interest Rate	 
	  Years to Maturity	  	(millions of dollars)	 	  	(%)	 
	 1 year
	  	 	981	 	  	 	2.7	 
	 2 years
	  	 	1,153	 	  	 	2.3	 
	 3 years
	  	 	803	 	  	 	2.1	 
	 4 years
	  	 	603	 	  	 	3.2	 
	 5 years
	  	 	133	 	  	 	6.1	 
		  	 	3,673	 	  	 	2.7	 
	 6 – 10 years
	  	 	850	 	  	 	2.9	 
	 Over 10 years
	  	 	6,945	 	  	 	5.1	 
	 	  	 	11,468	 	  	 	4.1	 


  

					
		 	12	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Interest payment obligations related to long-term debt are summarized by year in the following table:

  

					
	 	  	Interest Payments	 
	  Year	  	(millions of dollars)	 
	 Remainder of 2018
	  	 	148	 
	 2019
	  	 	448	 
	 2020
	  	 	429	 
	 2021
	  	 	411	 
	 2022
	  	 	393	 
		  	 	1,829	 
	 2023-2027
	  	 	1,834	 
	 2028+
	  	 	4,666	 
	 	  	 	8,329	 

  

	15.	 CONVERTIBLE DEBENTURES 



 

									
	 	  	Nine months ended
September 30,	 	  	Year ended
December 31,	 
	  (millions of dollars)	  	2018	 	  	2017	 
	 Carrying value - beginning
	  	 	487	 	  	 	—	 
	 Receipt of Initial Instalment, net of deferred financing costs
	  	 	—	 	  	 	486	 
	 Amortization of deferred financing costs
	  	 	2	 	  	 	1	 
	 Carrying value - ending
	  	 	489	 	  	 	487	 
			
	 Face value - ending
	  	 	513	 	  	 	513	 

 On August 9, 2017, in connection with the acquisition of Avista Corporation, the Company completed the sale of
$1,540 million aggregate principal amount of 4.00% convertible unsecured subordinated debentures (Convertible Debentures) represented by instalment receipts, which included the exercise in full of the over-allotment option granted to the
underwriters to purchase an additional $140 million aggregate principal amount of the Convertible Debentures (Debenture Offering). 
 The
Convertible Debentures were sold on an instalment basis at a price of $1,000 per Convertible Debenture, of which $333 (Initial Instalment) was paid on closing of the Debenture Offering and the remaining $667 (Final Instalment) is payable on a date
(Final Instalment Date) to be fixed by the Company following satisfaction of conditions precedent to the closing of the acquisition of Avista Corporation. The gross proceeds received from the Initial Instalment were $513 million. The Company
incurred financing costs of $27 million, which are being amortized to financing charges over approximately 10 years, the contractual term of the Convertible Debentures, using the effective interest rate method. 

The Convertible Debentures will mature on September 30, 2027. A coupon rate of 4% is paid on the $1,540 million aggregate principal amount of
the Convertible Debentures, and based on the carrying value of the Initial Instalment, this translates into an effective annual yield of 12%. After the Final Instalment Date, the interest rate will be 0%. The interest expense recorded during the
three and nine months ended September 30, 2018 was $15 million and $46 million (2017 - $9 million and $9 million), respectively. 

If the Final Instalment Date occurs on a day that is prior to the first anniversary of the closing of the Debenture Offering, holders of the Convertible
Debentures who have paid the Final Instalment on or before the Final Instalment Date will be entitled to receive, in addition to the payment of accrued and unpaid interest to and including the Final Instalment Date, an amount equal to the interest
that would have accrued from the day following the Final Instalment Date to and including the first anniversary of the closing of the Debenture Offering had the Convertible Debentures remained outstanding and continued to accrue interest until and
including such date (Make-Whole Payment). No Make-Whole Payment will be payable if the Final Instalment Date occurs on or after the first anniversary of the closing of the Debenture Offering. 

At the option of the holders and provided that payment of the Final Instalment has been made, each Convertible Debenture will be convertible into common
shares of the Company at any time on or after the Final Instalment Date, but prior to the earlier of maturity or redemption by the Company, at a conversion price of $21.40 per common share, being a conversion rate of 46.7290 common shares per $1,000
principal amount of Convertible Debentures. The conversion feature meets the definition of a Beneficial Conversion Feature (BCF), with an intrinsic value of approximately $92 million. Due to the contingency associated with the
debentureholders’ ability to exercise the conversion, the BCF has not been recognized. Between the time the contingency is resolved and the Final Instalment Date, the Company will recognize approximately $92 million of interest expense
associated with amortization of the BCF. 
 Prior to the Final Instalment Date, the Convertible Debentures may not be redeemed by the Company, except
that the Convertible Debentures will be redeemed by the Company at a price equal to their principal amount plus accrued and unpaid interest following the earlier of: (i) notification to holders that the conditions necessary to approve the
acquisition of Avista Corporation will not be satisfied; (ii) termination of the acquisition agreement; and (iii) May 1, 2019 if notice of the Final Instalment Date has not been given to holders on or before April 30, 2019. Upon
any such redemption, the Company will pay for each Convertible Debenture (i) $333 plus accrued and unpaid interest to the holder of the instalment receipt; and (ii) $667 to the selling debentureholder on behalf of 

  

					
		 	13	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 the holder of the instalment receipt in satisfaction of the final instalment. In addition, after the
Final Instalment Date, any Convertible Debentures not converted may be redeemed by the Company at a price equal to their principal amount plus any unpaid interest, which accrued prior to and including the Final Instalment Date. 

At maturity, the Company will have the right to pay the principal amount due in common shares, which will be valued at 95% of their weighted-average
trading price on the Toronto Stock Exchange for the 20 consecutive trading days ending five trading days preceding the maturity date. 
  

	16.	 FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 



Non-Derivative Financial Assets and Liabilities 

At September 30, 2018 and December 31, 2017, the Company’s carrying amounts of cash and cash equivalents, accounts receivable, due from
related parties, short-term notes payable, accounts payable, and due to related parties are representative of fair value due to the short-term nature of these instruments. 

Fair Value Measurements of Long-Term Debt 
 The fair values and
carrying values of the Company’s long-term debt at September 30, 2018 and December 31, 2017 are as follows: 
  

																	
	 	  	September 30, 2018	 	  	December 31, 2017	 
	  (millions of dollars)	  	Carrying Value	 	  	Fair Value	 	  	Carrying Value	 	  	Fair Value	 
	 Long-term debt measured at fair value:
	  				  				  				  			
	 $50 million of MTN Series 33 notes
	  	 	49	 	  	 	49	 	  	 	49	 	  	 	49	 
	 $500 million MTN Series 37 notes
	  	 	493	 	  	 	493	 	  	 	492	 	  	 	492	 
	 $300 million MTN Series 39 notes
	  	 	297	 	  	 	297	 	  	 	—	 	  	 	—	 
	 Other notes and debentures
	  	 	10,617	 	  	 	11,586	 	  	 	9,526	 	  	 	11,027	 
	 Long-term debt, including current portion
	  	 	11,456	 	  	 	12,425	 	  	 	10,067	 	  	 	11,568	 

 Fair Value Measurements of Derivative Instruments 

At September 30, 2018, Hydro One Inc. had interest-rate swaps with a total notional amount of $850 million (December 31, 2017 – $550
million) that were used to convert fixed-rate debt to floating-rate debt. These swaps are classified as fair value hedges. Hydro One Inc.’s fair value hedge exposure was approximately 8% (December 31, 2017 – 6%) of its total long-term
debt. At September 30, 2018, Hydro One Inc. had the following interest-rate swaps designated as fair value hedges: 
  

	•	 	 a $50 million fixed-to-floating
interest-rate swap agreement to convert $50 million of the $350 million MTN Series 33 notes maturing April 30, 2020 into three-month variable rate debt; 



	•	 	 two $125 million and one $250 million
fixed-to-floating interest-rate swap agreements to convert the $500 million MTN Series 37 notes maturing November 18, 2019 into three-month variable rate debt;
and 



	•	 	 a $300 million fixed-to-floating
interest-rate swap agreement to convert the $300 million MTN Series 39 notes maturing June 25, 2021 into three-month variable rate debt. 



At September 30, 2018 and December 31, 2017, the Company had no interest-rate swaps classified as undesignated contracts. 

In October 2017, the Company entered into a deal-contingent foreign exchange forward contract to convert $1.4 billion Canadian to US dollars at an
initial forward rate of 1.27486 Canadian per 1.00 US dollars, and a range up to 1.28735 Canadian per 1.00 US dollars based on the settlement date. The contract is contingent on the Company closing the proposed Avista Corporation acquisition and is
intended to mitigate the foreign currency risk related to the portion of the Avista Corporation acquisition purchase price financed with the issuance of Convertible Debentures. If the acquisition does not close, the contract would not be completed
and no amounts would be exchanged. The contract can be executed upon approval of the acquisition up to March 31, 2019. This contract is an economic hedge and does not qualify for hedge accounting. It has been accounted for as an undesignated
contract with changes in fair value being recorded in earnings as they occur. 

  

					
		 	14	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Fair Value Hierarchy 

The fair value hierarchy of financial assets and liabilities at September 30, 2018 and December 31, 2017 is as follows: 

 

																					
	  September 30, 2018 (millions of dollars)	  	Carrying
Value	 	  	Fair
  Value	 	  	    Level 1	 	  	    Level 2	 	  	    Level 3	 
	 Assets:
	  				  				  				  				  			
	 Cash and cash equivalents
	  	 	613	 	  	 	613	 	  	 	613	 	  	 	—	 	  	 	—	 
	 Derivative instrument
	  				  				  				  				  			
	 Foreign exchange contract
	  	 	22	 	  	 	22	 	  	 	—	 	  	 	—	 	  	 	22	 
	 	  	 	635	 	  	 	635	 	  	 	613	 	  	 	—	 	  	 	22	 
						
	 Liabilities:
	  				  				  				  				  			
	 Short-term notes payable
	  	 	444	 	  	 	444	 	  	 	444	 	  	 	—	 	  	 	—	 
	 Long-term debt, including current portion
	  	 	11,456	 	  	 	12,425	 	  	 	—	 	  	 	12,425	 	  	 	—	 
	 Convertible debentures
	  	 	489	 	  	 	398	 	  	 	398	 	  	 	—	 	  	 	—	 
	 Derivative instruments
	  				  				  				  				  			
	 Fair value hedges – interest-rate swaps
	  	 	11	 	  	 	11	 	  	 	—	 	  	 	11	 	  	 	—	 
	 	  	 	12,400	 	  	 	13,278	 	  	 	842	 	  	 	12,436	 	  	 	—	 
						
	  December 31, 2017 (millions of dollars)	  	Carrying
Value	 	  	Fair
Value	 	  	Level 1	 	  	Level 2	 	  	Level 3	 
	 Assets:
	  				  				  				  				  			
	 Cash and cash equivalents
	  	 	25	 	  	 	25	 	  	 	25	 	  	 	—	 	  	 	—	 
	 	  	 	25	 	  	 	25	 	  	 	25	 	  	 	—	 	  	 	—	 
						
	 Liabilities:
	  				  				  				  				  			
	 Short-term notes payable
	  	 	926	 	  	 	926	 	  	 	926	 	  	 	—	 	  	 	—	 
	 Long-term debt, including current portion
	  	 	10,067	 	  	 	11,568	 	  	 	—	 	  	 	11,568	 	  	 	—	 
	 Convertible debentures
	  	 	487	 	  	 	574	 	  	 	574	 	  	 	—	 	  	 	—	 
	 Derivative instruments
	  				  				  				  				  			
	 Fair value hedges – interest-rate swaps
	  	 	9	 	  	 	9	 	  	 	—	 	  	 	9	 	  	 	—	 
	 Foreign exchange contract
	  	 	3	 	  	 	3	 	  	 	—	 	  	 	—	 	  	 	3	 
	 	  	 	11,492	 	  	 	13,080	 	  	 	1,500	 	  	 	11,577	 	  	 	3	 

 Cash and cash equivalents include cash and short-term investments. The carrying values are representative of fair value
because of the short-term nature of these instruments. 
 The fair value of the hedged portion of the long-term debt is primarily based on the present
value of future cash flows using a swap yield curve to determine the assumption for interest rates. The fair value of the unhedged portion of the long-term debt is based on unadjusted period-end market prices
for the same or similar debt of the same remaining maturities. 
 The fair value of the convertible debentures is based on their closing price on
September 28, 2018 (last business day in September 2018), as posted on the Toronto Stock Exchange. 
 The Company uses derivative instruments as an
economic hedge for foreign exchange risk. The value of the foreign exchange contract is derived using valuation models commonly used for derivatives. These valuation models require a variety of inputs, including contractual terms, forward price
yield curves, probability of closing the Avista Corporation acquisition, and the contract settlement date. The Company’s valuation models also reflect measurements for credit risk. The fair value of the foreign exchange contract includes
significant unobservable inputs, and therefore has been classified accordingly as Level 3. The significant unobservable inputs used in the fair value measurement of the foreign exchange contract relates to the assessment of probability of
closing the Avista Corporation acquisition and the contract settlement date. 

  

					
		 	15	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Changes in the Fair Value of Financial Instruments Classified in Level 3 

The following table summarizes the changes in fair value of financial instruments classified in Level 3 for the nine months ended September 30,
2018 and the year ended December 31, 2017: 
  

									
	  (millions of dollars)	 	Nine months ended
September 30,
2018	 	 	Year ended
December 31,
2017	 
	 Fair value of asset (liability) - beginning
	 	 	(3	) 	 	 	—	 
	 Unrealized gain (loss) on foreign exchange contract included in financing charges
	 	 	25	 	 	 	(3	) 
	 Fair value of asset (liability) -
ending
	 	 	22	 	 	 	(3	) 

 There were no transfers between any of the fair value levels during the nine months ended September 30, 2018 and the
year ended December 31, 2017. 
 Risk Management 

Exposure to market risk, credit risk and liquidity risk arises in the normal course of the Company’s business. 

Market Risk 
 Market risk refers primarily to the
risk of loss which results from changes in costs, foreign exchange rates and interest rates. The Company is exposed to fluctuations in interest rates, as its regulated return on equity is derived using a formulaic approach that takes anticipated
interest rates into account. The Company is not currently exposed to material commodity price risk. 
 The Company uses a combination of fixed and
variable-rate debt to manage the mix of its debt portfolio. The Company also uses derivative financial instruments to manage interest-rate risk. The Company utilizes interest-rate swaps, which are typically designated as fair value hedges, as a
means to manage its interest rate exposure to achieve a lower cost of debt. The Company may also utilize interest-rate derivative instruments to lock in interest-rate levels in anticipation of future financing. 

A hypothetical 100 basis points increase in interest rates associated with variable-rate debt would not have resulted in a significant decrease in Hydro
One’s net income for the three and nine months ended September 30, 2018 and 2017. 
 The Company is exposed to foreign exchange fluctuations
as a result of entering into a deal-contingent foreign exchange forward agreement. This agreement is intended to mitigate the foreign currency risk related to the portion of the Avista Corporation acquisition purchase price financed with the
issuance of Convertible Debentures. 
 For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the
derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in the Consolidated Statements of Operations and Comprehensive Income. The net unrealized loss (gain) on the hedged debt
and the related interest-rate swaps for the three and nine months ended September 30, 2018 and 2017 was not material. 
 Credit Risk 

Financial assets create a risk that a counterparty will fail to discharge an obligation, causing a financial loss. At September 30, 2018 and
December 31, 2017, there were no significant concentrations of credit risk with respect to any class of financial assets. The Company’s revenue is earned from a broad base of customers. As a result, Hydro One did not earn a material amount
of revenue from any single customer. At September 30, 2018 and December 31, 2017, there was no material accounts receivable balance due from any single customer. 

At September 30, 2018, the Company’s allowance for doubtful accounts was $25 million (December 31, 2017 – $29 million). Adjustments
and write-offs are determined on the basis of a review of overdue accounts, taking into consideration historical experience. At September 30, 2018, approximately 6% (December 31, 2017 – 5%) of the Company’s net accounts receivable
were outstanding for more than 60 days. 
 Hydro One manages its counterparty credit risk through various techniques including: entering into
transactions with highly rated counterparties; limiting total exposure levels with individual counterparties; entering into master agreements which enable net settlement and the contractual right of offset; and monitoring the financial condition of
counterparties. The Company monitors current credit exposure to counterparties both on an individual and an aggregate basis. The Company’s credit risk for accounts receivable is limited to the carrying amounts on the Consolidated Balance
Sheets. 
 Derivative financial instruments result in exposure to credit risk since there is a risk of counterparty default. The credit exposure of
derivative contracts, before collateral, is represented by the fair value of contracts at the reporting date. At September 30, 2018 and December 31, 2017, the counterparty credit risk exposure on the fair value of these interest-rate swap
contracts was not material. At September 30, 2018, Hydro One’s credit exposure for all derivative instruments, and applicable payables and receivables, had a credit rating of investment grade, with four financial institutions as the
counterparties. 

  

					
		 	16	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Liquidity Risk 

Liquidity risk refers to the Company’s ability to meet its financial obligations as they come due. Hydro One meets its short-term operating liquidity
requirements using cash and cash equivalents on hand, funds from operations, the issuance of commercial paper, and the Operating Credit Facilities. The short-term liquidity under the Commercial Paper Program, Operating Credit Facilities, and
anticipated levels of funds from operations are expected to be sufficient to fund normal operating requirements. 
 On June 18, 2018, Hydro One
filed a short form base shelf prospectus (Universal Base Shelf Prospectus) with securities regulatory authorities in Canada to replace the universal base shelf prospectus that expired on April 30, 2018. The Universal Base Shelf Prospectus
allows Hydro One to offer, from time to time in one or more public offerings, up to $4.0 billion of debt, equity or other securities, or any combination thereof, during the 25-month period ending on
July 18, 2020. 
  

	17.	 PENSION AND POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS 



Estimated annual defined benefit pension plan contributions for 2018, 2019 and 2020 are approximately $50 million, $70 million, and
$70 million, respectively, based on an actuarial valuation as at December 31, 2017 and projected levels of pensionable earnings. Employer contributions made during the nine months ended September 30, 2018 were $37 million (2017
– $67 million). 
 The following tables provide the components of the net periodic benefit costs for the three and nine months ended
September 30, 2018 and 2017: 
  

																	
	 	  	 	 	 	 	 	 	Post-Retirement and	 
	 	  	 Pension Benefits
  
	 	 	 Post-Employment Benefits

 
	 
	  Three months ended September 30 (millions of dollars)	  	2018	 	 	2017	 	 	2018	 	  	2017	 
	 Current service cost
	  	 	44	 	 	 	36	 	 	 	12	 	  	 	12	 
	 Interest cost
	  	 	71	 	 	 	76	 	 	 	14	 	  	 	17	 
	 Expected return on plan assets, net of
expenses1
	  	 	(117	) 	 	 	(110	) 	 	 	—	 	  	 	—	 
	 Amortization of actuarial losses
	  	 	21	 	 	 	20	 	 	 	1	 	  	 	2	 
	 Net periodic benefit
costs
	  	 	19	 	 	 	22	 	 	 	27	 	  	 	31	 
					
	 Charged to results of operations2
	  	 	6	 	 	 	10	 	 	 	12	 	  	 	14	 
				
	 	  	 	 	 	 	 	 	Post-Retirement and	 
	 	  	 Pension Benefits
  
	 	 	 Post-Employment Benefits

 
	 
	  Nine months ended September 30 (millions of dollars)	  	2018	 	 	2017	 	 	2018	 	  	2017	 
	 Current service cost
	  	 	132	 	 	 	109	 	 	 	36	 	  	 	36	 
	 Interest cost
	  	 	212	 	 	 	228	 	 	 	42	 	  	 	51	 
	 Expected return on plan assets, net of
expenses1
	  	 	(350	) 	 	 	(331	) 	 	 	—	 	  	 	—	 
	 Amortization of actuarial losses
	  	 	63	 	 	 	60	 	 	 	2	 	  	 	6	 
	 Net periodic benefit
costs
	  	 	57	 	 	 	66	 	 	 	80	 	  	 	93	 
					
	 Charged to results of operations2
	  	 	17	 	 	 	31	 	 	 	33	 	  	 	41	 

  

	1 	 The expected long-term rate of return on pension plan assets for the year ending December 31, 2018 is 6.5% (2017 -
6.5%). 


  

	2 	 The Company accounts for pension costs consistent with their inclusion in
OEB-approved rates. During the three and nine months ended September 30, 2018, pension costs of $14 million (2017 - $22 million) and $39 million (2017 - $68 million), respectively, were
attributed to labour, of which $6 million (2017 - $10 million) and $17 million (2017 - $31 million), respectively, were charged to operations, and $8 million (2017 - $12 million) and $22 million (2017 - $37 million) respectively,
were capitalized as part of the cost of property, plant and equipment and intangible assets. 


  

	18.	 ENVIRONMENTAL LIABILITIES 



The following table shows the movements in environmental liabilities for the nine months ended September 30, 2018 and the year ended
December 31, 2017: 
  

									
	  (millions of dollars)	  	Nine months ended
September 30,
2018	 	 	Year ended
December 31,
2017	 
	 Environmental liabilities – beginning
	  	 	196	 	 	 	204	 
	 Interest accretion
	  	 	5	 	 	 	8	 
	 Expenditures
	  	 	(17	) 	 	 	(24	) 
	 Revaluation adjustment
	  	 	—	 	 	 	8	 
	 Environmental liabilities – ending
	  	 	184	 	 	 	196	 
	 Less: current portion
	  	 	(32	) 	 	 	(28	) 
	 	  	 	152	 	 	 	168	 


  

					
		 	17	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 The following table shows the reconciliation between the undiscounted basis of environmental liabilities
and the amount recognized on the Consolidated Balance Sheets after factoring in the discount rate: 
  

									
	  (millions of dollars)	 	September 30,
2018	 	 	December 31,
2017	 
	 Undiscounted environmental liabilities
	 	 	188	 	 	 	206	 
	 Less: discounting environmental liabilities to present value
	 	 	(4	) 	 	 	(10	) 
	 Discounted environmental
liabilities
	 	 	184	 	 	 	196	 

 At September 30, 2018, the estimated future environmental expenditures were as follows: 

 

					
	  (millions of dollars)	  	  	 
	 Remainder of 2018
	  	 	8	 
	 2019
	  	 	29	 
	 2020
	  	 	32	 
	 2021
	  	 	34	 
	 2022
	  	 	31	 
	 Thereafter
	  	 	54	 
	 	  	 	188	 

  

	19.	 SHARE CAPITAL 



Common Shares 
 The Company is authorized to issue an unlimited
number of common shares. At September 30, 2018, the Company had 595,882,438 common shares issued and outstanding (December 31, 2017 - 595,386,711). 

The following table presents the changes to common shares during the nine months ended September 30, 2018. 

 

					
	  (number of shares)	  	  	 
	 Common shares – December 31, 2017
	  	 	595,386,711	 
	 Common shares issued – share grants1
	  	 	481,227	 
	 Common shares issued – share grants2
	  	 	119	 
	 Common shares issued – LTIP3
	  	 	14,381	 
	 Common shares – September 30, 2018
	  	 	595,882,438	 

  

	1 	 On April 1, 2018, Hydro One issued from treasury 481,227 common shares in accordance with provisions of the Power
Workers’ Union (PWU) and the Society of United Professionals (Society) Share Grant Plans. 



	2 	 On May 14, 2018, Hydro One issued from treasury 119 common shares in accordance with provisions of the PWU Share
Grant Plan. 



	3 	 On May 31, 2018, Hydro One issued from treasury 14,381 common shares in accordance with provisions of the LTIP.



 Preferred Shares 
 The Company is
authorized to issue an unlimited number of preferred shares, issuable in series. At September 30, 2018 and December 31, 2017, two series of preferred shares are authorized for issuance: the Series 1 preferred shares and the Series 2
preferred shares. At September 30, 2018 and December 31, 2017, the Company had 16,720,000 Series 1 preferred shares and no Series 2 preferred shares issued and outstanding. 

 

	20.	 DIVIDENDS 



During the three months ended September 30, 2018, preferred share dividends in the amount of $4 million (2017 - $4 million) and common share
dividends in the amount of $137 million (2017 - $131 million) were declared and paid. 
 During the nine months ended September 30, 2018,
preferred share dividends in the amount of $13 million (2017 - $13 million) and common share dividends in the amount of $405 million (2017 - $387 million) were declared and paid. 

 

	21.	 EARNINGS PER COMMON SHARE 



Basic earnings per common share (EPS) is calculated by dividing net income attributable to common shareholders of Hydro One by the weighted-average number
of common shares outstanding. 

  

					
		 	18	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Diluted EPS is calculated by dividing net income attributable to common shareholders of Hydro One by the
weighted-average number of common shares outstanding adjusted for the effects of potentially dilutive stock-based compensation plans, including the share grant plans and the Long-term Incentive Plan (LTIP), which are calculated using the treasury
stock method. 
  

																	
	 	 	 Three months ended September 30

 
	 	 	 Nine months ended September 30

 
	 
	  	 	2018	 	 	2017	 	 	2018	 	 	2017	 
					
	 Net income attributable to common shareholders (millions of dollars)
	 	 	194	 	 	 	219	 	 	 	616	 	 	 	503	 
					
	 Weighted-average number of shares
	 				 				 				 			
	 Basic
	 	 	595,882,438	 	 	 	595,386,308	 	 	 	595,714,016	 	 	 	595,254,201	 
	 Effect of dilutive stock-based compensation plans
	 	 	1,968,856	 	 	 	2,130,453	 	 	 	2,128,211	 	 	 	2,172,635	 
	 Diluted
	 	 	597,851,294	 	 	 	597,516,761	 	 	 	597,842,227	 	 	 	597,426,836	 
					
	 EPS
	 				 				 				 			
	 Basic
	 	 	$0.33	 	 	 	$0.37	 	 	 	$1.03	 	 	 	$0.85	 
	 Diluted
	 	 	$0.32	 	 	 	$0.37	 	 	 	$1.03	 	 	 	$0.84	 

 The common shares contingently issuable as a result of the Convertible Debentures are not included in diluted EPS until
conditions for closing the Avista Corporation acquisition are met (see Note 4 - Business Combinations for details of the acquisition). 
  

	22.	 STOCK-BASED COMPENSATION 



Share Grant Plans 
 Hydro One has two share grant plans (Share
Grant Plans), one for the benefit of certain members of the Power Workers’ Union (the PWU Share Grant Plan) and one for the benefit of certain members of The Society of United Professionals (formerly The Society of Energy Professionals) (the
Society Share Grant Plan). A summary of share grant activity under the Share Grant Plans during the three and nine months ended September 30, 2018 and 2017 is presented below: 

 

																	
	 	  	Three months ended	 	  	Nine months ended	 
	 	  	 	 	  	 September 30
  
	 	  	 	 	 	 September 30
  
	 
	  (number of share grants)	  	2018	 	  	2017	 	  	2018	 	 	2017	 
	 Share grants outstanding – beginning
	  	 	4,344,386	 	  	 	4,962,804	 	  	 	4,825,732	 	 	 	5,334,415	 
	 Vested and
issued1,2
	  	 	—	 	  	 	—	 	  	 	(481,346	) 	 	 	(371,611	) 
	 Share grants outstanding – ending
	  	 	4,344,386	 	  	 	4,962,804	 	  	 	4,344,386	 	 	 	4,962,804	 


	1 	 On April 1, 2018, Hydro One issued from treasury 481,227 common shares to eligible employees in accordance with
provisions of the PWU and the Society Share Grant Plans. 



	2 	 On May 14, 2018, Hydro One issued from treasury 119 common shares to an eligible employee in accordance with
provisions of the PWU Share Grant Plan. 


 Directors’ Deferred Share Unit (DSU) Plan 

A summary of DSUs activity under the Directors’ DSU Plan during the three and nine months ended September 30, 2018 and 2017 is presented below:

  

																	
	 	  	Three months ended	 	  	Nine months ended	 
	 	  	 	 	  	 September 30
  
	 	  	 	 	  	 September 30
  
	 
	  (number of DSUs)	  	2018	 	  	2017	 	  	2018	 	  	2017	 
	 DSUs outstanding - beginning
	  	 	243,660	 	  	 	141,553	 	  	 	187,090	 	  	 	99,083	 
	 Granted
	  	 	10,764	 	  	 	22,504	 	  	 	67,334	 	  	 	64,974	 
	 DSUs outstanding - ending
	  	 	254,424	 	  	 	164,057	 	  	 	254,424	 	  	 	164,057	 

 At September 30, 2018, a liability of $5 million (December 31, 2017 - $4 million) related to previously awarded
Directors’ DSUs to the Company’s former Board of Directors (Board) has been recorded at the June 29, 2018 (last business day in June 2018) closing price of the Company’s common shares of $20.04 (December 31, 2017 - $22.40) and is
included in accounts payable and other current liabilities (December 31, 2017 - included in long-term accounts payable and other liabilities) on the Consolidated Balance Sheets. 

The liability related to the Company’s new Board is not significant and has been recorded at the September 28, 2018 (last business day in
September 2018) closing price of the Company’s common shares of $19.64. This liability is included in long-term accounts payable and other liabilities on the Consolidated Balance Sheets. 

  

					
		 	19	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Management DSU Plan 

A summary of DSUs activity under the Management DSU Plan during the three and nine months ended September 30, 2018 and 2017 is presented below: 

 

																	
	 	  	Three months ended	 	  	Nine months ended	 
	 	  	 	 	  	 September 30
  
	 	  	 	 	  	 September 30
  
	 
	  (number of DSUs)	  	2018	 	  	2017	 	  	2018	 	  	2017	 
	 DSUs outstanding - beginning
	  	 	105,870	 	  	 	67,583	 	  	 	67,829	 	  	 	—	 
	 Granted
	  	 	1,242	 	  	 	657	 	  	 	39,283	 	  	 	68,240	 
	 DSUs outstanding - ending
	  	 	107,112	 	  	 	68,240	 	  	 	107,112	 	  	 	68,240	 

 At September 30, 2018, a liability of $1 million (December 31, 2017 - $1 million) related to previously awarded
Management DSUs to the Company’s former President and Chief Executive Officer (CEO) has been recorded at the June 29, 2018 (last business day in June 2018) closing price of the Company’s common shares of $20.04 (December 31, 2017 -
$22.40) and is included in accounts payable and other current liabilities (December 31, 2017 - included in long-term accounts payable and other liabilities) on the Consolidated Balance Sheets. 

A liability of $1 million (December 31, 2017 - not significant) related to other Management DSUs has been recorded at the September 28, 2018
(last business day in September 2018) closing price of the Company’s common shares of $19.64 (December 31, 2017—$22.40) and is included in long-term accounts payable and other liabilities on the Consolidated Balance Sheets. 

LTIP 
 Performance Share Units (PSU) and Restricted Share
Units (RSU) 
 A summary of PSU and RSU awards activity under the LTIP during the three and nine months ended September 30, 2018 and 2017 is
presented below: 
  

																	
	 	  	 PSUs
  
	 	 	 RSUs
  
	 
	  Three months ended September 30 (number of units)	  	2018	 	 	2017	 	 	2018	 	 	2017	 
	 Units outstanding - beginning
	  	 	846,520	 	 	 	443,095	 	 	 	700,070	 	 	 	409,645	 
	 Granted
	  	 	4,320	 	 	 	35,790	 	 	 	3,160	 	 	 	21,040	 
	 Vested
	  	 	—	 	 	 	(609	) 	 	 	—	 	 	 	(609	) 
	 Forfeited
	  	 	(1,630	) 	 	 	(9,036	) 	 	 	(5,160	) 	 	 	(7,676	) 
	 Settled
	  	 	(238,030	) 	 	 	—	 	 	 	(158,310	) 	 	 	—	 
	 Units outstanding -
ending
	  	 	611,180	 	 	 	469,240	 	 	 	539,760	 	 	 	422,400	 

  

																	
	 	  	 PSUs
  
	 	 	 RSUs
  
	 
	  Nine months ended September 30 (number of units)	  	2018	 	 	2017	 	 	2018	 	 	2017	 
	 Units outstanding - beginning
	  	 	429,980	 	 	 	230,600	 	 	 	393,430	 	 	 	254,150	 
	 Granted
	  	 	445,120	 	 	 	303,240	 	 	 	345,790	 	 	 	239,990	 
	 Vested
	  	 	—	 	 	 	(609	) 	 	 	(13,470	) 	 	 	(14,079	) 
	 Forfeited
	  	 	(25,890	) 	 	 	(63,991	) 	 	 	(27,680	) 	 	 	(57,661	) 
	 Settled
	  	 	(238,030	) 	 	 	—	 	 	 	(158,310	) 	 	 	—	 
	 Units outstanding -
ending
	  	 	611,180	 	 	 	469,240	 	 	 	539,760	 	 	 	422,400	 

 The grant date total fair value of the awards granted during the three and nine months ended September 30, 2018 was
$nil and $16 million (2017 - $1 million and $13 million), respectively. The compensation expense related to these awards recognized by the Company during the three and nine months ended September 30, 2018 was $7 million and
$12 million (2017 - $2 million and $5 million), respectively. The expense recognized in the third quarter of 2018 included $5 million related to previously awarded PSUs and RSUs to the Company’s former President and CEO for which
costs had not previously been recognized. These awards, consisting of 238,030 PSUs and 158,310 RSUs, were settled in the third quarter of 2018 through a one-time cash settlement arrangement. 

Stock Options 
 The Company is authorized to
grant stock options under its LTIP to certain eligible employees. During the nine months ended September 30, 2018, the Company granted 1,450,880 stock options (2017 - nil), all in the first quarter of 2018. The stock options granted are
exercisable for a period not to exceed seven years from the date of grant and vest evenly over a three-year period on each anniversary of the date of grant. 

The fair value based method is used to measure compensation expense related to stock options and the expense is recognized over the vesting period on a
straight-line basis. The fair value of the stock option awards granted was estimated on the date of grant using a Black-Scholes valuation model. 

  

					
		 	20	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Stock options granted and the weighted-average assumptions used in the valuation model for options
granted during the nine months ended September 30, 2018 are as follows: 
  

					
	 Exercise price1

	  	$	20.70	 
	 Grant date fair value per option
	  	$	1.66	 
	 Valuation assumptions:
	  			
	 Expected dividend yield2 
	  	 	3.78	% 
	 Expected volatility3 
	  	 	15.01	% 
	 Risk-free interest rate4 
	  	 	2.00	% 
	 Expected option term5 
	  	 	4.5 years	 

  

	1 	 Hydro One common share price on the date of the grant. 



	2 	 Based on dividend and Hydro One common share price on the date of the grant. 



	3 	 Based on average daily volatility of peer entities for a 4.5-year term.




	4 	 Based on bond yield for an equivalent Canadian government bond. 



	5 	 Determined using the option term and the vesting period. 



A summary of stock options activity during the three and nine months ended September 30, 2018 and 2017 is presented below: 

 

																	
	 	  	 Three months ended

September 30
	 	  	 Nine months ended

September 30
	 
	  (number of stock options)	  	2018	 	 	2017	 	  	2018	 	 	2017	 
	 Stock options outstanding - beginning
	  	 	1,450,880	 	 	 	—	 	  	 	—	 	 	 	—	 
	 Granted1 
	  	 	—	 	 	 	—	 	  	 	1,450,880	 	 	 	—	 
	 Cancelled2 
	  	 	(500,970	) 	 	 	—	 	  	 	(500,970	) 	 	 	—	 
	 Stock options outstanding - ending1 
	  	 	949,910	 	 	 	—	 	  	 	949,910	 	 	 	—	 

  

	1 	 All stock options granted and outstanding at September 30, 2018 are
non-vested. 


  

	2 	 During the three months ended June 30, 2018, 500,970 stock options previously awarded to the Company’s former
President and CEO were cancelled. The unrecognized compensation expense related to the cancelled stock options was $1 million. 



The compensation expense related to stock options recognized by the Company during the three and nine months ended September 30, 2018 was not
significant. At September 30, 2018, there was $1 million of unrecognized compensation expense related to stock options not yet vested, which is expected to be recognized over a weighted-average period of approximately three years. 

 

	23.	 RELATED PARTY TRANSACTIONS 



The Province is a shareholder of Hydro One with approximately 47.4% ownership at September 30, 2018. The IESO, Ontario Power Generation Inc. (OPG),
Ontario Electricity Financial Corporation (OEFC), and the OEB, are related parties to Hydro One because they are controlled or significantly influenced by the Province. 
  

																			
	 	  	 	 	Three months ended	 	 	Nine months ended	 
	
   (millions of dollars)

 
	  	 	 	 	 	 	 September 30
  
	 	 	 	 	 	 September 30
  
	 
	Related Party	  	Transaction	 	2018	 	 	2017	 	 	2018	 	 	2017	 
	 Province
	  	Dividends paid	 	 	69	 	 	 	69	 	 	 	205	 	 	 	231	 
	 IESO
	  	Power purchased	 	 	321	 	 	 	276	 	 	 	1,079	 	 	 	1,169	 
		  	Revenues for transmission services	 	 	474	 	 	 	390	 	 	 	1,293	 	 	 	1,124	 
		  	Amounts related to electricity rebates	 	 	113	 	 	 	181	 	 	 	353	 	 	 	321	 
		  	Distribution revenues related to rural rate protection	 	 	59	 	 	 	61	 	 	 	177	 	 	 	185	 
		  	Distribution revenues related to the supply of electricity to remote northern communities	 	 	8	 	 	 	8	 	 	 	24	 	 	 	24	 
	 	  	Funding received related to Conservation and Demand Management programs	 	 	11	 	 	 	18	 	 	 	33	 	 	 	44	 
	 OPG
	  	Power purchased	 	 	2	 	 	 	2	 	 	 	8	 	 	 	7	 
		  	Revenues related to provision of construction and equipment maintenance services	 	 	2	 	 	 	2	 	 	 	6	 	 	 	6	 
	 	  	Costs related to the purchase of services	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1	 
	 OEFC
	  	Power purchased from power contracts administered by the OEFC	 	 	1	 	 	 	—	 	 	 	2	 	 	 	1	 
	 OEB
	  	OEB fees	 	 	2	 	 	 	2	 	 	 	6	 	 	 	6	 

 Sales to and purchases from related parties are based on the requirements of the OEB’s Affiliate Relationships Code.
Outstanding balances at period end are interest-free and settled in cash. 

  

					
		 	21	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  


	24.	 CONSOLIDATED STATEMENTS OF CASH FLOWS 



The changes in non-cash balances related to operations consist of the following: 

 

																	
	 	 	Three months ended	 	 	Nine months ended	 
	 	 	 	 	 	September 30	 	 	 	 	 	September 30	 
	  (millions of dollars)	 	2018	 	 	2017	 	 	2018	 	 	2017	 
	 Accounts receivable
	 	 	(7	) 	 	 	50	 	 	 	46	 	 	 	241	 
	 Due from related parties
	 	 	27	 	 	 	(38	) 	 	 	(57	) 	 	 	(136	) 
	 Materials and supplies
	 	 	—	 	 	 	—	 	 	 	(2	) 	 	 	—	 
	 Prepaid expenses and other assets
	 	 	5	 	 	 	9	 	 	 	2	 	 	 	6	 
	 Accounts payable
	 	 	22	 	 	 	(10	) 	 	 	(14	) 	 	 	(9	) 
	 Accrued liabilities
	 	 	3	 	 	 	(16	) 	 	 	78	 	 	 	(57	) 
	 Due to related parties
	 	 	1	 	 	 	2	 	 	 	(151	) 	 	 	(141	) 
	 Accrued interest
	 	 	32	 	 	 	37	 	 	 	31	 	 	 	35	 
	 Long-term accounts payable and other liabilities
	 	 	(5	) 	 	 	(3	) 	 	 	(6	) 	 	 	(1	) 
	 Post-retirement and post-employment benefit liability
	 	 	7	 	 	 	21	 	 	 	19	 	 	 	61	 
	 	 	 	85	 	 	 	52	 	 	 	(54	) 	 	 	(1	) 

 Capital Expenditures 
 The
following tables reconcile investments in property, plant and equipment and intangible assets and the amounts presented in the Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2018 and 2017. The
reconciling items include net change in accruals and capitalized depreciation. 
  

																									
	 	  	 Three months ended September 30, 2018

 
	 	 	 Nine months ended September 30, 2018

 
	 
	 	  	Property,	 	 	 	 	 	 	 	 	Property,	 	 	 	 	 	 	 
	 	  	Plant and	 	 	Intangible	 	 	 	 	 	Plant and	 	 	Intangible	 	 	 	 
	  (millions of dollars)	  	Equipment	 	 	Assets	 	 	Total	 	 	Equipment	 	 	Assets	 	 	Total	 
	 Capital investments
	  	 	(374	) 	 	 	(28	) 	 	 	(402	) 	 	 	(1,047	) 	 	 	(61	) 	 	 	(1,108	) 
	 Reconciling items
	  	 	4	 	 	 	3	 	 	 	7	 	 	 	25	 	 	 	—	 	 	 	25	 
	 Cash outflow for capital expenditures
	  	 	(370	) 	 	 	(25	) 	 	 	(395	) 	 	 	(1,022	) 	 	 	(61	) 	 	 	(1,083	) 
			
	 	  	 Three months ended September 30, 2017

 
	 	 	 Nine months ended September 30, 2017

 
	 
	 	  	Property,	 	 	 	 	 	 	 	 	Property,	 	 	 	 	 	 	 
	 	  	Plant and	 	 	Intangible	 	 	 	 	 	Plant and	 	 	Intangible	 	 	 	 
	  (millions of dollars)	  	Equipment	 	 	Assets	 	 	Total	 	 	Equipment	 	 	Assets	 	 	Total	 
	 Capital investments
	  	 	(359	) 	 	 	(21	) 	 	 	(380	) 	 	 	(1,087	) 	 	 	(49	) 	 	 	(1,136	) 
	 Reconciling items
	  	 	1	 	 	 	(3	) 	 	 	(2	) 	 	 	16	 	 	 	(8	) 	 	 	8	 
	 Cash outflow for capital expenditures
	  	 	(358	) 	 	 	(24	) 	 	 	(382	) 	 	 	(1,071	) 	 	 	(57	) 	 	 	(1,128	) 

 Supplementary Information 
  

																	
	 	  	Three months ended	 	  	Nine months ended	 
	 	  	 	 	  	September 30	 	  	 	 	  	September 30	 
	  (millions of dollars)	  	2018	 	  	2017	 	  	2018	 	  	2017	 
	 Net interest paid
	  	 	106	 	  	 	89	 	  	 	356	 	  	 	308	 
	 Income taxes paid
	  	 	1	 	  	 	3	 	  	 	13	 	  	 	11	 

  

	25.	 CONTINGENCIES 



Hydro One is involved in various lawsuits and claims in the normal course of business. In the opinion of management, the outcome of such matters will not
have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. 
 Hydro One Inc., Hydro One
Networks, Hydro One Remote Communities Inc., and Norfolk Power Distribution Inc. are defendants in a class action suit in which the representative plaintiff is seeking up to $125 million in damages related to allegations of improper billing
practices. The plaintiff’s motion for certification was dismissed by the court on November 28, 2017, but the plaintiff has appealed the court’s decision. The appeal was heard on October 16, 2018, and it is likely that the court
will render its decision before the end of 2018. 
 To date, four putative class action lawsuits were filed by purported Avista Corporation shareholders
in relation to the Merger. First, Fink v. Morris, et al., was filed in Washington state court and the amended complaint names as defendants Avista Corporation’s directors, Hydro One, Olympus Holding Corp., Olympus Corp., and Bank of
America Merrill Lynch. The suit alleges that Avista Corporation’s directors breached their fiduciary duties in relation to the Merger, aided and abetted by Hydro One, Olympus Holding 

  

					
		 	22	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  

 Corp., Olympus Corp. and Bank of America Merrill Lynch. The Washington state court issued an order
staying the litigation until after the plaintiffs file an amended complaint, which must be no later than 30 days after Avista Corporation or Hydro One publicly announces that the Merger has closed. Second, Jenß v. Avista Corp., et al.,
Samuel v. Avista Corp., et al., and Sharpenter v. Avista Corp., et al., were each filed in the US District Court for the Eastern District of Washington and named as defendants Avista Corporation and its directors; Sharpenter also named
Hydro One, Olympus Holding Corp., and Olympus Corp. The lawsuits alleged that the preliminary proxy statement omitted material facts necessary to make the statements therein not false or misleading. Jenß, Samuel, and Sharpenter were all
voluntarily dismissed by the respective plaintiffs with no consideration paid by any of the defendants. The one remaining class action is consistent with expectations for US merger transactions and, while there is no certainty as to outcome, Hydro
One believes that the lawsuit is not material to Hydro One. 
  

	26.	 COMMITMENTS 



The following table presents a summary of Hydro One’s commitments under leases, outsourcing and other agreements due in the next 5 years and
thereafter: 
  

																									
	  September 30, 2018 (millions of dollars) 	  	Year 1	 	  	Year 2	 	  	Year 3	 	  	Year 4	 	  	Year 5	 	  	Thereafter	 
	 Outsourcing agreements
	  	 	124	 	  	 	99	 	  	 	39	 	  	 	3	 	  	 	2	 	  	 	4	 
	 Long-term software/meter agreement
	  	 	14	 	  	 	17	 	  	 	6	 	  	 	1	 	  	 	2	 	  	 	1	 
	 Operating lease commitments
	  	 	9	 	  	 	10	 	  	 	6	 	  	 	2	 	  	 	1	 	  	 	3	 
	
	 The following table presents a summary of Hydro One’s other commercial commitments by year of expiry in the next 5
years and thereafter:
  
	  
 

	  September 30, 2018 (millions of dollars) 	  	Year 1	 	  	Year 2	 	  	Year 3	 	  	Year 4	 	  	Year 5	 	  	Thereafter	 
	 Operating Credit Facilities1 
	  	 	—	 	  	 	—	 	  	 	—	 	  	 	2,550	 	  	 	—	 	  	 	—	 
	 Letters of credit2 
	  	 	162	 	  	 	5	 	  	 	—	 	  	 	—	 	  	 	—	 	  	 	—	 
	 Guarantees3

	  	 	325	 	  	 	—	 	  	 	—	 	  	 	—	 	  	 	—	 	  	 	—	 

  

	1 	 For repayment and expiry details of the Acquisition Credit Facilities, please see Note 14 - Debt and Credit Agreements.



  

	2 	 Letters of credit consist of a $154 million letter of credit related to retirement compensation arrangements, a
$7 million letter of credit provided to the IESO for prudential support, $5 million in letters of credit to satisfy debt service reserve requirements, and $1 million in letters of credit for various operating purposes.



  

	3 	 Guarantees consist of prudential support provided to the IESO by Hydro One Inc. on behalf of its subsidiaries.



 27. SEGMENTED REPORTING 
 Hydro One has
three reportable segments: 
  

	•	 The Transmission Segment, which comprises the transmission of high voltage electricity across the province,
interconnecting more than 70 local distribution companies and certain large directly connected industrial customers throughout the Ontario electricity grid; 


  

	•	 The Distribution Segment, which comprises the delivery of electricity to end customers and certain other municipal
electricity distributors; and 


  

	•	 Other Segment, which includes certain corporate activities and the operations of the Company’s telecommunications
business. 


 The designation of segments has been based on a combination of regulatory status and the nature of the services provided.
Operating segments of the Company are determined based on information used by the chief operating decision maker in deciding how to allocate resources and evaluate the performance of each of the segments. The Company evaluates segment performance
based on income before financing charges and income taxes from continuing operations (excluding certain allocated corporate governance costs). 
  

																	
	  Three months ended September 30, 2018 (millions of dollars) 	  	Transmission	 	  	Distribution	 	  	Other	 	 	Consolidated	 
	 Revenues
	  	 	493	 	  	 	1,103	 	  	 	10	 	 	 	1,606	 
	 Purchased power
	  	 	—	 	  	 	733	 	  	 	—	 	 	 	733	 
	 Operation, maintenance and administration
	  	 	95	 	  	 	150	 	  	 	26	 	 	 	271	 
	 Depreciation and amortization
	  	 	111	 	  	 	100	 	  	 	2	 	 	 	213	 
	 Income (loss) before financing charges and income
taxes
	  	 	287	 	  	 	120	 	  	 	(18	) 	 	 	389	 
					
	 Capital investments
	  	 	261	 	  	 	138	 	  	 	3	 	 	 	402	 


  

					
		 	23	 	



















 HYDRO ONE LIMITED 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) 

For the three and nine months ended September 30, 2018 and 2017 
  


																	
	  Three months ended September 30, 2017 (millions of dollars) 	  	Transmission	 	  	Distribution	 	  	Other	 	 	Consolidated	 
	 Revenues
	  	 	471	 	  	 	1,040	 	  	 	11	 	 	 	1,522	 
	 Purchased power
	  	 	—	 	  	 	675	 	  	 	—	 	 	 	675	 
	 Operation, maintenance and administration
	  	 	95	 	  	 	149	 	  	 	33	 	 	 	277	 
	 Depreciation and amortization
	  	 	105	 	  	 	102	 	  	 	2	 	 	 	209	 
	 Income (loss) before financing charges and income taxes
	  	 	271	 	  	 	114	 	  	 	(24	) 	 	 	361	 
					
	 Capital investments
	  	 	240	 	  	 	138	 	  	 	2	 	 	 	380	 
					
	  Nine months ended September 30, 2018 (millions of dollars) 	  	Transmission	 	  	Distribution	 	  	Other	 	 	Consolidated	 
	 Revenues
	  	 	1,344	 	  	 	3,284	 	  	 	31	 	 	 	4,659	 
	 Purchased power
	  	 	—	 	  	 	2,158	 	  	 	—	 	 	 	2,158	 
	 Operation, maintenance and administration
	  	 	295	 	  	 	435	 	  	 	67	 	 	 	797	 
	 Depreciation and amortization
	  	 	321	 	  	 	294	 	  	 	5	 	 	 	620	 
	 Income (loss) before financing charges and income taxes
	  	 	728	 	  	 	397	 	  	 	(41	) 	 	 	1,084	 
					
	 Capital investments
	  	 	693	 	  	 	409	 	  	 	6	 	 	 	1,108	 
					
	  Nine months ended September 30, 2017 (millions of dollars) 	  	Transmission	 	  	Distribution	 	  	Other	 	 	Consolidated	 
	 Revenues
	  	 	1,199	 	  	 	3,317	 	  	 	35	 	 	 	4,551	 
	 Purchased power
	  	 	—	 	  	 	2,213	 	  	 	—	 	 	 	2,213	 
	 Operation, maintenance and administration
	  	 	296	 	  	 	447	 	  	 	79	 	 	 	822	 
	 Depreciation and amortization
	  	 	309	 	  	 	288	 	  	 	6	 	 	 	603	 
	 Income (loss) before financing charges and income taxes
	  	 	594	 	  	 	369	 	  	 	(50	) 	 	 	913	 
					
	 Capital investments
	  	 	701	 	  	 	427	 	  	 	8	 	 	 	1,136	 

 Total Assets by Segment: 
  

									
	 	  	September 30,	 	  	December 31,	 
	  (millions of dollars)	  	2018	 	  	2017	 
	 Transmission
	  	 	14,013	 	  	 	13,608	 
	 Distribution
	  	 	9,426	 	  	 	9,259	 
	 Other
	  	 	3,398	 	  	 	2,834	 
	 Total assets
	  	 	26,837	 	  	 	25,701	 

 Total Goodwill by Segment:

  

									
	 	  	September 30,	 	  	December 31,	 
	  (millions of dollars)	  	2018	 	  	2017	 
	 Transmission
	  	 	157	 	  	 	157	 
	 Distribution
	  	 	168	 	  	 	168	 
	 Total goodwill
	  	 	325	 	  	 	325	 

 All revenues, assets and substantially all costs, as the case may be, are earned, held or incurred in Canada. 

 

	28.	 SUBSEQUENT EVENTS 



Dividends 
 On November 7, 2018, preferred share dividends
in the amount of $5 million and common share dividends in the amount of $137 million ($0.23 per common share) were declared. 
 Repayment of Long-term Debt

 On October 9, 2018, Hydro One Inc. repaid $750 million of maturing long-term debt notes (MTN Series 28 notes) under its MTN Program.

 Directors’ DSUs 
 In October 2018, $4 million
related to previously awarded Directors’ DSUs to the Company’s former Board was paid. 
  

  

					
		 	24